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FINRA Rule 3120

Requires a member firm to designate and identify a principal(s) who will establish, maintain, and enforce a system of supervisory control policies and procedures.

Rule Overview

Jurisdiction: United States

Regulator: FINRA

Topic: Supervision

Overview
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The supervisory control system must:

  • test and verify that the supervisory procedures are reasonably designed to achieve compliance with applicable laws and regulations
  • create or amend supervisory procedures where a need for change is uncovered by testing
  • require the submission of an annual report:
    • detailing the system of supervisory controls in place
    • including the summary of test results
    • identifying significant identified exceptions in those results
    • highlighting additional or amended supervisory procedures created in response to the results

For firms reporting $200m or more in gross revenues in calendar year (n) a report in calendar year (n+1) must be submitted to senior management, which must include, for year (n):

  1. a tabulation of reports pertaining to customer complaints and internal investigations made to FINRA
  2. a discussion of the compliance efforts including procedures and educational programs in:
    1. trading and market activities
    2. investment banking activities
    3. antifraud and sales practices
    4. finance and operations
    5. supervision
    6. anti-money laundering

 

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